Ep 124 - Timber Transformations: Building a Greener World

Adam Jones (00:05):

Well thanks so much for coming on the podcast. Marco, can you start by telling us a little bit about yourself, your history, how you got into timber and what you're doing today?

Marco Huter (00:16):

Right, so my history, I'm Native Austrian, born here living in Austria and they're actually close to Salzburg, which somebody might know, the city of Mozart. And my background is not an engineering background. My background is a business background. I've studied in Vienna and the Economics University and started my career in, interestingly, fast moving consumer goods companies like Unilever, Johnson Johnson. So learning sales, marketing markets from scratch. And I moved then to other industries and about since seven years now I'm working with KLH and my position is I'm managing director of KLH and especially responsible for market developments and distribution marketing, project management especially. And so my focus is on the markets and yeah, it's very exciting to be in that industry with such a potential great development. And what gives me the most thrill is we are part of a mega, mega trend environment, sustainability. And it gives you a good feeling when you leave the office and think, okay, I have more contributed to saving our world, then I've contributed to destroying it. And it's always a good feeling and motivating, even if sometimes the economic developments are up and downs and you have your challenges, but in general that gives you a very good feeling,

(01:47):

At least to me. I mean,

Adam Jones (01:49):

Oh it, it's crazy when you compare individual decisions as a consumer, it might be riding to work or riding a bike instead of driving a car. And then you compare it to the difference of a building level. You very quickly offset your lifetime if you are converting concrete into timber. Right?

Marco Huter (02:07):

Absolutely. It's very quickly and it's very good to see that worldwide timber base is getting more and more shares in the construction industry, different in different areas, different in different countries. But in general we are gaining but still there's a very long way to go. And we are convinced that there is no way of meeting your climate targets as a country or as manhood without using more massive timber and construction. You cannot do everything with massive timber. That is correct. And we are not saying this, but you can do much more than we do today. And it's really great to see that Australia, that in Australia there are so many projects now or many projects on the table being developed. And of course we would be very much to be part of these projects, but even if we're not, it's good to see that things like this are happening because it contributes to the general acceptance of massive timber.

Adam Jones (02:59):

Yeah, absolutely. So you are KLH one of the largest suppliers globally. What are the, and you expanding, looking for expanding markets, what is the most exciting accelerated trend growth market? Is it happening everywhere or is there different areas around

Marco Huter (03:16):

The world? Generally? As you said, KLH was the first to start with cross-laminated timber production. Actually the acronym KLH means in German slagging ho, which is the literal translation of cross-laminated timber. Oh yeah. So back in 19 nine, KLH was the first to start we have to really the pioneer. And since then, so in the last 20, more than 20 years, we have delivered to 40,000 projects worldwide. So on all continents. And I think we can say that we have the most experience in delivering to CLT project in any climate zones, whether it's in the tropic South or in the Arctic north. We've done it. We know how to do it and how to meet the challenges and also to fulfill the needs of the customers. Which market is at the moment the strongest? Generally as the development has started in Europe, Europe is still a stronghold for cross laminate timber still, although there are many other markets developing very well and there are new manufacturers coming to the market, which is good because it makes the product more accessible to construction companies and giving them the opportunity to use it.

(04:31):

At the moment we have in Europe we have a kind of, well, recession is, maybe the word is too hard, but it's a downturn in the development of the economies, especially in central Europe. And you feel that by the number of projects which are available in the market, many are there, but they're on hold. So within Europe we have a very dynamic north Scandinavia, south Spain, Eastern Europe, very dynamic. UK is catching up after having a very hard time after exiting the European Union, the US a very is a very dynamic market at the moment. We are there, we have a subsidiary in us, we are getting projects and it's good. And what for us is really great is because we have always been looking to Australia, we've done projects in Australia and one of my most favorite projects has been realized in Australia that in Australia we have now a momentum where there are so many projects or many projects being talked about, which are huge, which could be really, how do you say, lighthouse projects to push the sector. And so I would say from the uk, US is at the moment very dynamic Northern Europe, southern Europe, eastern Europe. And I see in Australia a very strong momentum of new projects. And that's good to see because you are a continent, you're not just a country, you're a continent and is so much opportunity to do things differently than in the past.

Adam Jones (06:00):

Yeah. I have to ask you, you say one of your favorite projects was in Australia, which one

Marco Huter (06:05):

In, well I think that's the one probably people in the industry know that's 55 South Bank Melbourne, which in the financial district, which was the highest vertical extension or densification with CLT, it was designed by Bates and smart architects. And for us it's for the developer wanted to build a hotel on an existing building. So that's a challenge because you have all these people in the offices below that you cannot just cancel contracts and get them out. You have contracts. And they also wanted to do on top as much as they can, add as additional floors in terms of at the end of the day having a better return on investment. And the third challenge was the roads. You cannot close the roads in financial district for two years because you put all the material there, all the steel, all the cement and make your concrete.

(07:02):

And at the end the solution was with KLH CLT and all the people could stay in there. The offices below continued to work instead of five floors, they put up top 10 floors, they didn't have to close the road. So it was a perfect solution for them and for us it was a great experience and logistically everything went well. And it's still the highest vertical extension in CLT worldwide. So it's exciting building. I mean I was there when it was installed and it was great to see the truck is coming, installation from the truck and truck goes away and no roads were closed and everything is clean. And the worker said who used to work with concrete, they said, I'm going home, I'm not dusty, I'm just clean and my wife is asking me, have you worked at all? So they also had this positive experience, very exciting.

(07:55):

And there's another one I have to mention, which was just delivered last in 21, 21, 22. It's Ascent in Milwaukee, it's in Wisconsin on Lake Michigan. The one you've probably seen somewhere. It's a 26th floor hybrid building. And at the moment it's the tallest timber concrete composite building. We have six floors or six floors, that's right. It's about 25 stories. It's six floors with concrete and then you have 19 floors with KHCT, I've been there in October. And you stand there on the 26th floor and they look down and you think that's, that's all K lh. It's great. And it's still a lighthouse. So other constructors are motivated by that to go into that direction, maybe using other supplier, doesn't matter, just push more massive timber into construction. And last but least was my third favorite project is a totally different one. Social housing, putting on three on about 18 buildings. The customers we have delivered for, they've put on three existing floors, two more floors have created 380 new apartments without the people below that having to move out. So created social housing and the customers able to offer social rents to the people because you didn't have to buy new land. It was an extension on existing land and it was about 110,000 square meters one project. So it was huge. And these are my three favorites if you can say actually more or less on three continents by accident.

Adam Jones (09:30):

Yeah, phenomenal. The first two

Marco Huter (09:32):

You can have me talking hours about.

Adam Jones (09:34):

No, it's great. We're both,

Marco Huter (09:36):

I'm sorry,

Adam Jones (09:36):

We're both passionate about this space so there's no need to apologize. We had both the first two podcasts, so we had podcasts on the first two. So people who want to hear about Ascent and 55 South Bank, they'll be able to see it in our background of our podcast list. So I asked you before Marco about the opportunities around the world. We talk about the drivers in terms of tailwinds of demand. What are some of the overall challenges to the adoption of mass timber that you're seeing everywhere? Yeah,

Marco Huter (10:08):

Well I think when KLH has always been the first mover into new markets and the biggest challenge is we have always experienced is a lot of misunderstanding towards using timber in construction. There's a lot of things about fire protection. So you say the usual saying is, well why should I build something of timber timbering is something I put in the oven to get to burn it so I will not be in the house. And that's a very also very strong argumentation which is used by our strategic competitor, which is concrete. And that's one of the challenges. So in terms of to educate decision makers and like structural engineers, architects, showing them the opportunities which massive timber or CLT in special KH can offer in terms of architectural design and also that everything is secure. So I'm always saying, well yes you can burn timber, but at the end of the day we must reach and obey all the safety regulations like everybody else.

(11:19):

There is no excuse for a massive timber building or not special regulation. You always have to achieve the same safety levels in fire protection, in acoustics, in everything. And there are a solution for that and we are achieving that everywhere. I mean you cannot build in US a building with 26 floors without having a very sound fire protection solution or you cannot build schools, kindergartens, hospitals with CLT, KLH CLT without obeying all the single safety regulations. So there's a lot of education, a lot of explaining, usual at the beginning and convincing people saying, okay look. And also of course what we have always been doing as kage, we have always tried to get as much as possible certifications, doing a lot of testings, achieving all necessary testing results to give confidence to customers. Because I think the most important thing is when you have a relation with customers or clients especially in new markets, is they must rely on what you're doing because they must be sure that whatever they will get is according to the rules, is in a good quality and is going to perform as it is designed to.

(12:32):

And so I would say that's one of the biggest challenges going into market is convincing decision makers and educating them because they have been doing things for a hundred years the same way. Everything is very well organized, they know what to do, they know what are the rules with concrete and steel, everything. And now suddenly there's somebody coming saying, yeah, you can do that as well with massive timber and everything gets a little bit complicated. You have to change your mindset, you have to try new things. And why should you do that? It's so easy doing the old stuff and this is the challenge at the beginning. What helps us is that there is a very strong political will to change that and that, how do you say in English that it's becoming clearer to decision makers that we have to do something. I mean look in Austria we are very surprised that we are so hot summers. I mean where does this come from? Climate change is evident. So we have to do things and this is giving us more opportunity. We see governments supporting the use of massive timber in construction, whether this is in Germany or it's in UK or it's in other countries. Also outside. I think Australia is having an initiative to do more now in our September as far as I understood.

(13:48):

So all these helps us and therefore I said we are part of a mega trend. We are not outside of mega trend, but of course there's a lot of operational work and convincing and educating and I think that's our job. We need to give good arguments to decision makers. Why should they do that? Investors are rather, or developers are sometimes easier to convince or easy in terms of showing them the advantages of using CLT massive timber scale H in construction they're faster, they have a bigger, better return on investment, they're more safety under construction there's more cost control and capital cost control because you do everything prefabricated, you don't have, these are the cost and then on the side you don't have anything to add or to change or to do everything. Exactly. So you have to invest more in planning and you have a lot of savings on site. They're open to that. I mean you can convince the developer if you tell him instead of five floors, you put on 10 floors and he just sees the dollar and he says, yeah, let's go for it. And then comes the rest.

Adam Jones (14:56):

Yeah. That's so good. Well there's a lot to go there. So the one question I would ask, so say if there is a mega trend, everyone agrees on that. I think governments, if you're making net zero carbon targets, you look at the materials that can deliver, you're like, well it's only mass timber essentially. But then we go say the factories fill up, then we go to right back to the supply chain at the start, how's the feed stock going to change feeding the CLT and back to the land? Have you got any thoughts on that? And do we still have lots of Yeah, what's our room for scaling up alongside this demand? Can we scale up

Marco Huter (15:34):

In terms of resource for do we have enough logs to supply to have this expansion? Well, I can talk for the Austrian market because I mean for the Austrian situation, because we are sourcing everything within driving distance, we are sourcing from Austria, neighboring Slovenia, which is in the south of Austria and little bit of Czech. So everything is more or less in driving distance. All our sourcing is 100% is PFC certified. So it's sustainable forestry and we can also do it on efficacy. So this is where we are taking a lot, we are putting a lot of focus on that. And speaking for the Austrian forest where we source 90% from 80%, we can say that whatever the Austrian massive timber or timber industry including Somos, everything uses every year. That's less than what Regrows every year. So in terms for our markets for the supply for Austrian companies producing and doing in Austria, which are actually out of the big fours, the old more or less in Austria in our market.

(16:43):

And so we see no problem with the sourcing for these expansions for our area of sourcing because we know it's regrowing everywhere more than we use up. We have a lot of SPRs in Austria, we have the mountains. There is still, as I said, we don't even use that what regrows every year not talking about going into the stock. So we don't see a problem in that. But of course if we look very long term we see things like, I dunno now 50 years, 30 years we have as an industry we have to see where can we be more efficient in manufacturing to use less of the material. And this is a challenge which we already meeting at the moment. We have a new manufacturing side in Austria, which is, so we have two, the one is the first which we call the legend, which we have modernized and the other one is the most modern one in the world at the moment.

(17:47):

And here we have tried to use a lot of efficiency boosters and we can say that we have improved the efficiency and the yield there significantly, which means we're using less material, we have less, I mean in massive timber industry we actually have no waste, right? Because whatever remains is used for something else, but even these remains we have reduced considerably. So I think that's one thing where the industry has to move forward, how can we have more usage of the raw material? And the second thing is to what types of products can we think of who will use or will need less of that material? So these are the things, but in general, and also of course in the long term the forestry will have to think about can we use different types of species? What type of species could we use for that? But I think the discussion which is sometimes, which you hear sometimes is leave the trees where they are. This is the best way to store CO2.

(18:54):

Of course the industry has a different view on that, but I don't think this view is wrong because if you just keep the tree where he is and he still grows, he will take that CO2 here stored and it will keep it. But if you use the tree for making building and then you are actually in the carbon storage business, you have to replant new forests, new trees, and it will grow again in use even more CO2. So there's a cycle which is continuing. And then if we think further about cascading system reuse of massive timber elements for different new buildings and the recycling is just at the end of all that cascading cycle and then the whole picture changes and the idea to just leave the forest where they are and not use the timber for buildings is not such a good idea because at the end what is the alternative to do more concrete?

(19:52):

It cannot be that. So here the industry has to think about these issues. The one, the cascading system reuse, recycling, and the other side more efficient use of the raw material and the industry is working in that area. We have a lot of discussion in Europe about, I've just been on the world conference of timber engineering in Oslo two weeks ago. Very interesting. A lot of PhDs, universities and they are working on a lot of things thinking forward. And we as an industry, we go there and just to see where are the trends going, what is the science doing, which direction are we moving? Is this addressing the right things? And there's a lot of talk about reuse, recycling, cascading systems. This is not so imminent at the moment but will be something we need to think now to be ready to have solutions in 5, 6, 7, 9, 10 years. And that's good because it still gives even more momentum to use massive timber.

Adam Jones (20:52):

Yeah, it's fantastic. And the amount of research that goes on at WCTE, it's mind boggling. There's so much passion and enthusiasm from, 

Marco Huter (21:00):

have you been There by the way? No?

Adam Jones (21:02):

I did. I went to Seoul, I went to the one in Korea. I didn't go to the one in Norway. I've only been once in Australia.

Marco Huter (21:09):

Korea was interesting, Korea was interesting, but I think Oslo was even more interesting because you can see that the majority of the thought about massive timber is still a bit more European because it has started there. So many university are taking a lot of initiatives about new projects there, about scientific test projects, et cetera. And there's so many things one has take into account

Adam Jones (21:38):

So much going on and so exciting. Australia's absolutely

Marco Huter (21:41):

Very

Adam Jones (21:41):

Exciting. Taken the next one. So everyone listening, going to come down to our neck of the woods now this has

Marco Huter (21:46):

Been, well come to Austria to see a good manufacturing site.

Adam Jones (21:51):

Well I think you'll get plenty of people calling up. I think. I haven't been to some of the factories or your factory, but I've heard such great things about where it all is right now. But yeah, moving toward the end of the podcast now and that forward looking discussion, where do you see the industry going over the next five to 10 years, 20, 30. Where's it all heading, Marco, in the future? And what gets you excited?

Marco Huter (22:19):

You mean in terms of heading where? In terms of development, massive timber or CLT or a project?

Adam Jones (22:24):

It's an open question. So for construction and maybe the mass timber, yeah,

Marco Huter (22:29):

I think we'll see more modular buildings which gives let's say different has not changed. We still have a growing still population generally, especially in the hotspots, which means the big cities, you still have the need to create living space in cities, predominantly in cities. You have to create it fast because we need it. You have to create it without using scarce resources like sand for cement. And you have to make it to create that living space in a way that you don't add to the pollution. CO2 pollution, which means there is timber will play a part in it. And then we need to think about, if we talk about in June, 2050, I think research says two third of the population will believe in big cities.

(23:24):

The major trend which is already there from my point of view is going to be densification in big cities. And massive timber is a very good solution with especially CLT, KLH CLT lt because you can do vertical densification, you can add on existing building, horizontal densification, filling gaps, and you can transfer industrial sites into living space. And here this is going to be a very strong trend will by I think which will accelerate in the future. And this gives very good opportunities for us and because why cities will be a hotspot, because people there will be there and why densification will be a very strong momentum because we must stop, I don't know the exact word in English, but closing the surface of the earth, which just means putting buildings, I don't know the exact wording in English, but we have problems, example in our little countries that every day there's almost two football, two soccer or five soccer square places are, the earth is closed so it cannot breathe again, you don't have nature, so you cannot expand cities, you cannot expand.

(24:41):

So that's one trend. And the other trend we see is the use of modular solutions for making buildings, new buildings because it's quick, it's cost effective and it's standardized so you can build a lot of them. We've seen this trend in the Netherlands for example, where living is very expensive in some area, people cannot afford living and the government is now supporting modular buildings which you can live in. And when you move because your life is changing, you are doing something else, you can take the module and go somewhere else. This is at the beginning because still the majority of the people says, I want my house, I live there for my lifetime and I'm not going to move that. But your generation, so the younger generations people are changing their minds and we have to be ready to give solutions to them. So I think these are the big trends.

(25:33):

I see densifications in big city in different ways without using new land. And on the other side, modular buildings, we will still have strong architectural buildings, special design buildings that will be a very, very big segment. But these two ones especially modular, we'll see more in the future I believe. As far as that's in the construction side, I think generally we will see more support of massive timber politically and governmental. We have in Europe, the green deal, as you know from European Union, we will not reach these targets and without using more timber construction, for sure not. So it'll be a major part of that development. At the same time in the UK we have the net zero carbon initiative, which is also looking into this and we have that. So Europe is going to be, I think on the forefront on that because not because we are so smart, it's just because we are maybe started first with that. And I think that us will go into that direction as well. It depends who will be the next president of course, but you never know, maybe the other one comes back. So the one who mentioned that there is no climate change without saying any names, you know who I mean.

(26:54):

And so there will be days we continue to do that and Australia we see that development from looking from the outside. The impression is that you have a bit of a change in policy as far as this is concerned. And I think it's necessary because the climate change is one of the challenges no country can do alone. So every country has to give its country contribution, even if it's 0.2% of the global pollution. You have to do something. And I think that we will also see the big players like China changing their mind in that. We see there that timber is becoming more of a topic. Although China's always on its own, they want always their own solution, but it doesn't matter from my point of view, it's just important they do it

Adam Jones (27:45):

Well. That's so good. Yeah, such an exciting future and yeah, we're very proud of what we're doing here in Australia. We're for a small population, be proud. We've got some very high rise buildings and moving things Forward.

Marco Huter (27:58):

They're great development. Especially also what I can see in the south and in the west, projects coming up being thought about. And some of them are fantastic. If you see the rendering, you think, oh my god, how is this going to work? Yeah, well every time

Adam Jones (28:14):

Just pushes it forward. It just gives precedence for people who are cautious, people solving the fire problem at the high risely and then it puts things in perspective. Hey,

Marco Huter (28:26):

So exciting. So make more of these things. There are three buildings in, there are two buildings you can find in every CLT book. The one thing is Marie Grove, KLH Marie Grove, which was the first seven story building with panels, KLH panels or CLT and the other one is the Forte Tower in Melbourne. Yeah,

Adam Jones (28:47):

Absolutely.

Marco Huter (28:48):

You can find those two everywhere. And now it's the third one, which is going to be ascent.

Adam Jones (28:52):

Yeah,

Marco Huter (28:53):

So Australia is already one of them. Okay, so great. Yeah, let's do the next one.

Adam Jones (28:58):

We're doing well. Well it's been awesome chatting. See you Marco. If people want to find out more about yourself, KLH, where should we point the listeners?

Marco Huter (29:08):

Well, I think just in our website, KLH or we have a LinkedIn on KLH is on LinkedIn, we are on Facebook, we are on Instagram and our website. And if there is anything now for you, if anything we can help your podcast giving some information, whatever, without having immediately an interviews, just some background stuff, let me know. And if you happen to come to Europe, I mean you're very much invited to see in Austria and meet and show you our manufacturing.

Adam Jones (29:35):

Yeah, definitely. Well a hundred percent going to take that up. Well it's been awesome to chat to you today Marco. Thanks so much and we'll leave you there.